GST Impact Study for Jewellers

GST Council has decided 3% rate of GST on Gold under chapter 71. In the GST regime prices of Jewellery will be high as compared to in current scenario as the tax burden is more. We can understand the impact on price as under:

Due to GST the prices of jewellery will be increased by 0.99% or 2.79% without making charges or including making charges respectively.
In the excise, SSI exemption up to Rs. 6 crore is available but this limit will remain up to Rs. 20 lakh in the GST. Due to this more assesses will cover under the GST.

Transitional Provision

If the person is registered under earlier law shall be entitled for CENVAT credit furnished by him in the return for the period ending with the day immediately preceding the appointed day. We can understand the impact as under:

Example:Q. Mr. A registered under excise furnishes the return for the period ending 30th June 2017 with the CENVAT credit carried forward for Rs. 1,00,000/- Whether Mr. A is entitled for input of Rs. 1,00,000/- under GST?A. Jewellery is taxable in the excise and the same will be taxable in GST. Hence the CENVAT Credit in his return is carried forward in GST.

If the person is not registered under earlier law and duty paying invoice for Jewellery as on appointed day is available then the person is entitled to take credit of duty & taxes mentioned in invoice. Subject to Invoice were issued not earlier than 12 months immediately preceding the appointed day.Example:-Q. Mr. A not registered under excise and has the invoice dated 2nd June, 2016 for Jewellery containing excise duty of Rs. 18,000/- . In GST, Mr. A is liable to registered and the jewellery is in stock as on Appointed Day. Whether Mr. A is entitled to take credit of Excise paid on Jewellery.A. Yes, Mr. A is entitled to take credit of Rs. 18,000.

If the person is not registered under earlier law and duty paying invoice for Jewellery as on appointed day is not available then the person is entitled to take credit of 40% of CGST or 20% of SGST. For the purpose of the credit, supplies have been made and tax liability on supply has been paid.Example:-Q. Mr. A not registered under excise and No invoice held for Jewellery in stock as on Appointed Day. In GST, Mr. A is liable to registered. Whether Mr. A is entitled to take credit of Excise paid on Jewellery.A. Yes, Mr. A is entitled to take credit of 40% of CGST or 20% of IGST paid on Jewellery if supply of that stock is made and taxes CGST or IGST on such supply has been paid.

If person is registered as composition dealer in the earlier law and in the GST becomes as normal dealer, shall entitled to take the credit of eligible duties in respect of jewellery held in stock as on appointed day.Example:-Q. Mr. A is composition dealer in excise and In GST he is registered as normal dealer. He has Jewellery in stock as on Appointed Day and also have invoice of duty paid on the same. Whether Mr. A is entitled to take credit of Excise paid on Jewellery.A. Yes, Mr. A is entitled to take credit of Excise duty mentioned in Invoice.

JOB WORK FOR JEWELLARY SECTOR

In the current scenario, we can send the Gold for Job Work without paying any duty but the Jewellery shall be received back after completion of job work within 180 days of their being sent for Job work.In GST, Jewellery can be removed for Job Work without paying any tax but prior intimation to commissioner is required. As per ITC rules, inputs shall be sent to Job Workers under the cover of challan issued by the principal and the detail of challan for Gold dispatched to the Job Worker shall be furnished in GSTR-1 for that period.
The Jewellery may be received back to the principal’s place without tax or to the customers’ premises on payment of taxes, within 1 year of their being sent for Job Work.
If Jewellery has not received back within 1 year then the date on which Gold sent for Job Work is date of supply of Gold and taxes with interest shall be paid accordingly.
Principal shall be liable to maintain the record of Gold sent for Job Work. For the purpose of this benefit Job Worker should be registered otherwise such place of Job Worker shall be declared as an additional place of business by the principal. [Section 143 of the IGST Act, 2017]

Example: Q. Mr. P registered under Excise sent the Jewellery for Job Work to Mr. R on 15th March 2017.
I. Mr. R returned the Jewellery after completion of Job Work on 18th August 2017. Whether Mr. P or Mr. R is required to pay tax?
II. What If the Goods returned on 25th October 2017, Whether Mr. P or Mr. R is required to pay tax?
III. What If the Goods returned on 25th January 2018, Whether Mr. P or Mr. R is required to pay tax?

A. If the Jewellery received back before six month from the appointed day then there is no tax liability but the job worker and the manufacturer needs to file the detail of jewellery as on appointed day with the job worker.
I. No Tax Liability as Jewellery has been received back before six months from the appointed date.
II. No Tax Liability as Jewellery has been received back before six months from the appointed date.
III. In this case Jewellery has not received back within six month from the appointed day. Hence it is deemed that supply has been made on the date when jewellery sent for job work i.e. 15th March 2017. And Tax and interest shall be payable accordingly.

INPUT TAX CREDIT IN CASE OF JOB WORK [Section 19]
If the Jewellery received within one year after completion of Job Work then the Principal is entitled for ITC on inputs sent for Job Work.
If the inputs are directly sent to Job Workers then, the date shall be counted from the date of receipt of inputs by Job Worker.

TRANSITIONAL PROVISIONS FOR JOB WORK
If the Gold& inputs is sent for Job Work before the appointed date and the same is received back after completion of job work within six months from the appointed day or Jewellery removed directly from Job worker, after payment of tax in India or without payment of tax for export within six months from the appointed day, no tax shall be payable, only if the manufacturer or Job worker declare the details of the Gold or Jewellery held in stock by Job Worker on behalf of the manufacturer on the appointed day in the prescribed time, form and manner.

JEWELLARY SENT FOR APPROVAL
In the current regime, there is no tax and no time limits for Jewellery sent on Approval.
In the GST regime, if the Jewellery sent for approval then the same should be under cover of delivery challan.
Section 31(7) of CGST Act mandate that the invoice for Jewellery sent for approval shall be raised earliest of the following:-

Time when it becomes known that supply has taken place.

Six months from the date of removal.

JEWELLARY SENT FOR EXHIBITION OR FOR THE PURPOSE OF OTHER THAN SUPPLY
If the Jewellery sent for exhibition in the same state then the same shall be removed under cover of delivery challan.
If the Jewellery sent for exhibition in other state then the person is required to obtain registration in such other state as causal taxable person (CTP).
For the purpose of obtaining registration as Causal taxable Person, the application shall be made at least 5 days prior to the commencement of business and estimated liability of tax shall be paid in advance. The amount so paid can be used for paying his liability of tax at the time of supplies made.

Example:
Mr. A registered person in Rajasthan is sending Jewellery of Rs. 1 crore to Gujarat for exhibition.Q 1: Whether Mr. A is required to take registration in Gujarat?Q 2: Whether Mr. A is required to pay tax on Rs. 1 crore?Q 3: Whether Mr. A is required to pay tax on estimated supply?Q 4: Assume exhibition is on 20th September 2017 when Mr. A shall apply for registration?Q 5: What shall be charged by Mr. A in his invoice?

A. 1: Yes, Mr. A is required to obtain a registration in Gujarat as Casual Taxable Person.A. 2: No, Mr. A is not required to pay tax on Rs. 1 crore, the Jewellery will be removed under cover of challan.A. 3: Yes, at the time of registration of Casual Taxable Person, Mr. A is required to pay estimated tax liability.A. 4: Mr. A shall apply for registration 5 days prior to the exhibition i.e. before 15th September 2017.A. 5: In this case place of supply is Gujarat and Mr. A is required to charge IGST on the supply.

GST Tariff

Tariff Item

Description of goods

Rate

(1)

(2)

(3)

I. - NATURAL OR CULTURED PEARLS AND PRECIOUS OR SEMI-PRECIOUS STONES

7101

7101 10
7101 10 10
7101 10 20

7101 21 00
7101 22 00

-
---
---
-
--
--

Pearls, natural or cultured, whether or not worked or graded but not strung, mounted or set; natural or cultured, temporarily strung for con-venience of transport
Natural pearl:
Unworked
Worked
Cultured pearls:
Unworked
Worked

3% : 7101 Pearls, natural or cultured, whether or not worked or graded but not strung, mounted or set; Pearls, natural or culture, temporarily strung for convenience of transport.

7102

7102 10 00

7102 21

7102 21 10
7102 21 20
7102 29
7102 29 10
7102 29 90

-
-
--

---
---
--
---
---

Diamonds, whether or not worked, but not mounted or set
Unsorted
Industrial:
Unworked or simply sawan, cleaved or bruted:
Sorted
Unsorted
Other
Crushed
Other

0.25% Rough diamond [7102]

3% : 7102 Diamonds, whether or not worked, but not mounted or set [other than rough diamond]

7102 31 00

7102 39
7102 39 10

7102 39 90

-
--

--
---

---

Non-industrial:
Unworked or simply sawn, cleaved or bruted
Others:
Diamond, cut or otherwise worked but not mounted or set
Others

3% : 7103 Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience transport

7104

7104 10 00
7104 20 00

-
-

Synthetic or reconstructed precious or semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungraded synthetic or reconstructed precious or semi-precious stones, temporarily strung for convenience of transport
Piezo-electric quartz
Other, unworked or simply sawn or roughly shaped

3% : 7104 Synthetic or reconstructed precious or semi-precious stones, whether or not worked or graded but not strung, mounted or set; Ungraded synthetic or reconstructed precious stoned, temporarily strung for convenience of transport.

7104 90
7104 90 10

7104 90 90

-
---

---

Other:
Laboratory-created or laboratory grown or manmade or cultured or synthetic diamonds
Other

7105

7105 10 00
7105 90 00

-
-

Dust and powder of natural or synthetic precious or semi-precious stones
Of diamond
Other

Silver (including silver plated with gold or platinum), unwrought or in semi-manufactured forms, or in powder form
Powder
Other:
Unwrought
Semi-Manufactured:
Sheets, plates, strips, tubes and pipes
Other

7107 00 00

Base metals clad with silver, not further worked than semi-manufactured

3% : 7107 Base metals clad with silver, not further worked than semi-manufactured.

7108

7108 11 00
7108 12 00
7108 13 00
7108 20 00

-
--
--
--
-

Gold (including gold plated with platinum) unwrought or in semi- manufactured forms, or in powder form
Non-Monetary:
Powder
Other unwrought form
Other semi-manufactured forms
Monetary

3% : 7108 Gold ( including gold plated with platinum) Unwrought or in semi-manufactured forms, or in powder form.

7109 00 00

Base metals or silver, clad with gold, not further worked than semi-manufactured

3% : 7109 Base metals or silver, clad with gold, not further worked than semi- manufactured.

7110

7110 11

7110 11 10
7110 11 20
7110 19 00

7110 21 00
7110 29 00

-
--
---
---
--
-
--
--

Platinum, unwrought or in semi- manufactured form, or in powder form
Platinum:
Unwrought or in powder form
Unwrought form
In powder form
Other
Palladium:
Unwrought or in powder form
Other

Rhodium:
Unwrought or in powder form
Other
Iridium, osmium and ruthenium:
Unwrought or in powder form
Other

7111 00 00

Base metals, silver or gold, clad with platinum, not further worked than semi-manufactured

3% : 7111 Base metal, silver or gold clad with platinum, not further worked than semi-manufactured.

7112

7112 30 00

7112 91 00

7112 92 00

7112 99
7112 99 10

7112 99 20
7112 99 90

-

-
--

--

--
--

---
---

Waste and scrap of precious metal or of metal clad with precious metal; other waste and scrap containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal
Ash containing precious metal or precious metal compounds
Other:
Of gold, including metal clad with gold but excluding sweepings containing other precious metals
Of platinum, including metal clad with platinum but excluding sweepings containing other precious metals
Other:
Of silver, including metal clad with silver but excluding sweepings containing other precious metals
Sweepings containing gold or silver
Other

III. - JEWELLERY, GOLDSMITHS' AND SILVERSMITHS' WARES AND OTHER ARTICLES

7113

7113 11

7113 11 10
7113 11 20
7113 11 30
7113 11 90

-

--

---
---
---
---

Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal

Of precious metal whether or not plated or clad with precious metal:
Of silver, whether or not plated or clad with other precious metal:
Jewellery with filigree work
Jewellery studded with gems
Other articles of jewellery
Parts

3% : 7113 Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal.

7113 19

7113 19 10
7113 19 20
7113 19 30
7113 19 40

7113 19 50
7113 19 60
7113 19 90
7113 20 00

--

---
---
---
---

---
---
---
-

Of other precious meatl,whether or not plated or clad with precious metal;
Of gold, unstudded
Of gold, set with pearls
Of gold, set with diamonds
Of gold, set with other precious and semi-precious stones
Of platinum, unstudded
Pares
Other
Of base metal clad with precious metal

Articles of goldsmiths or silversmiths wares and pares thereof, of precious metal or metal clad with precious metal
Of precious metal, whether or not plated or clad with precious metal:
of silver, whether or not plated or clad with precious metal;
Articles
Pares
of other precious metal, or not plated or with precious metal:
Articles of gold
Articles of platinum
Parts
Of base metal clad with precious metal:
Articles clad with gold
Other articles
Parts

3% : 7114 Articles of goldsmiths or silversmiths wares and pares thereof, of precious metal or of metal clad with precious metal.

7115

7115 10 00

7115 90
7115 90 10

7115 90 20
7115 90 90

-

-
---

---
---

Other articles of precious metal or of metal clad with precious metal
Catalysts in the form of wire cloth or grill, of platinum
Other:
Laboratory and industrial articles of precious metal
Spinneret's made mainly of gold
Other

Imitation jewellery
Of base metal, whether or not plated with precious metal:
Cuff-links and studs
Other:
Bangles
German silver jewellery
Other
Other:
Jewellery studded with imitation pearls or imitation or synthetic stones
Other